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Investment Policy

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					  Investment Policy




Adopted as of April 16, 2007
 Prepared by: Edward A. Dion, County Auditor
    500 East San Antonio Street, Room 406
          El Paso, Texas 79901-2407
                (915)546-2040
                                                    County of El Paso, Texas Investment Policy

                                                                        Table of Contents

                                                                                                                                                            Page

     Policy Statement ...................................................................................................................................... 1
     Authority to Invest Funds ........................................................................................................................ 1
     Delegation of Authority ........................................................................................................................... 1
     Scope........................................................................................................................................................ 1
     Prudence and Ethical Standards............................................................................................................... 2
     Quality and Capability of Investment Management ................................................................................ 2
     Disclosure of Personal Business .............................................................................................................. 2
     Investment Objectives.............................................................................................................................. 3
     Investment Strategies ............................................................................................................................... 3
              Investment Strategy for all funds................................................................................................ 3
              General, Enterprise, and Internal service Funds ......................................................................... 4
              Special Revenue Fund................................................................................................................. 4
              Debt Service Fund ...................................................................................................................... 4
              Capital Projects Fund.................................................................................................................. 4
              Agency Fund............................................................................................................................... 4
     Safety of Principal.................................................................................................................................... 4
     Eligible Investments................................................................................................................................. 4
     Ineligible Investments .............................................................................................................................. 6
     Applications for approval as Broker/Dealer ............................................................................................ 6
     Qualifications for approval as Broker/Dealer .......................................................................................... 7
     Approval of Broker/Dealers....................................................................................................................... 8
     Annual Review of Approved Broker/Dealers ........................................................................................... 8
     Removal from Approved List .................................................................................................................... 8
     Diversification of the Investment Portfolio ............................................................................................... 9
              Diversifying the Investment Portfolio by Type ............................................................................ 9
              Diversifying the Investment Portfolio by Maturity .................................................................... 10
              Diversification Restrictions by Fund .......................................................................................... 10
                          General Fund.................................................................................................................. 10
                          Special Revenue Fund ...................................................................................................... 10
                          Debt Service Fund ......................................................................................................... 10
                          Capital Projects Fund..................................................................................................... 11
                          Enterprise Fund.............................................................................................................. 11
                          Internal Service Fund..................................................................................................... 11
                          Agency Fund.................................................................................................................. 11
     Competitive Selection of Investment Instruments ................................................................................... 11
     Safekeeping and Collateralization ........................................................................................................... 11
     Investment Procedures ............................................................................................................................. 12
     Internal Control........................................................................................................................................ 14
     Reporting Requirements .......................................................................................................................... 14
Notification of Investment Changes ................................................................................................................. 15
Selection of County Depository........................................................................................................................ 15
Investment Officer Training ............................................................................................................................. 15
Appendix A
        Texas Local Government Code, ' 116.112 ......................................................................................... 17
        Vernon=s Texas Code Annotated, Government Code
          Title 10, Chapters 2256 and 2257..................................................................................................... 17

                                                                                  -i-
      Vernon=s Texas Code Annotated, Government Code
        Title 5, Chapter 573 ..........................................................................................................................     17
      Vernon=s Texas Code Annotated, Government Code
        Title 7, Chapter 791 ..........................................................................................................................     17
Appendix B
      Certification Letter...............................................................................................................................   19
      Broker/Dealer Questionnaire ...............................................................................................................           20
Appendix C
      Investment Pool Questionnaire............................................................................................................             25
Appendix D
      List of Primary Government Securities Dealers ..................................................................................                      26
Appendix E
      Types of Securities ..............................................................................................................................    28




                                                                              - ii -
Investment Policy

Policy Statement

        It is the policy of the County of El Paso, Texas (County) to invest idle cash of all funds under the control and
custody of the county auditor in a manner maintaining the safety of principal and liquidity of the invested funds while
providing a reasonable rate of return.

Authority to Invest Funds

       Texas Local Government Code '116.112, authorizes Commissioners Court to invest county funds in
accordance with Texas Government Code ' 2256.003(a).

Delegation of Authority

        According to Texas Government Code '2256.005 (f), the Commissioners Court, by order expressly designates
the county auditor as investment officer to be responsible for the investment of the County’s funds consistent with this
investment policy.

         The county auditor establishes written procedures for the operation of the investment program consistent with
this investment policy. Authority granted to the county auditor to invest the County’s funds is effective until
rescinded by the Commissioners Court or termination of the county auditor’s employment with the County. County
auditor personnel authorized to initiate investment related activities are the investment supervisor, investment analyst,
and two alternate employees. All treasury division personnel have access to approve investment transactions initiated
by the investment division personnel. The county auditor or a designee in the absence of the county auditor will
review all investment transactions for approval and assure adequate security measures are in place. No person may
engage in an investment transaction except as provided under the terms of this policy and the procedures established
by the county auditor. The county auditor is responsible for all investment transactions undertaken and has
established a system of internal controls to regulate the activities of associated subordinates.

Scope

         This investment policy applies to all funds of the County under the control and custody of the county auditor,
which the Commissioners Court has authority to invest, unless expressly prohibited by law or is in contravention of
any depository contract between the County and our depository bank. These funds include but are not necessarily
limited to the:

        General Fund
        Special Revenue Fund
        Debt Service Fund
        Capital Projects Fund
        Enterprise Fund
        Internal Service Fund
        Agency Fund
        Any other funds held in the custody of the county auditor as provided by law.




                                                          -1-
Prudence and Ethical Standards

        The standard of prudence to be applied by the investment officer is the "prudent investor " rule, as stated in
Texas Government Code '2256.006(a), "Investments shall be made with the judgement and care, under prevailing
circumstances, that a person of prudence, discretion, and intelligence would exercise in the management of the
person’s own affairs, not for speculation, but for investment, considering the probable safety of capital and the
probable income to be derived."

        Investment of funds held in custody by the county auditor shall be governed by the following investment
objectives, in order of priority:

                      1.   Preservation and safety of principal;
                      2.   Liquidity;
                      3.   Diversification of the investment portfolio; and,
                      4.   Yield.

        As stated in the Texas Government code '2256.006(b), in determining whether an investment officer has
exercised prudence with respect to an investment decision, the determination shall be made taking into consideration:

        1.   The investment of all funds, or funds under the entity’s control, over which the officer had
             responsibility rather than a consideration as to the prudence of a single investment; and

        2.   Whether the investment decision was consistent with the written investment policy of the
             entity.

        The investment officer, acting in accordance with written procedures and exercising due diligence, shall not
be held personally responsible for a specific investment’s credit risks or market price changes, provided that these
deviations are reported immediately and that appropriate action is taken to control adverse developments.

Quality and Capability of Investment Management

El Paso County insures the quality and capability of the County’s investment personnel by providing periodic training
in investments for all personnel involved in the investment process through courses and seminars offered by
professional organizations and associations, in accordance with Texas Government Code §2256.008(a).

Disclosure of Personal Business

        An investment officer for the County of El Paso who has a personal business relationship with a business
organization offering to engage in an investment transaction with the County shall file a statement disclosing that
personal business interest with the Texas Ethics Commission and Commissioners Court, in accordance with Texas
Government Code ' 2256.005(i). An investment officer has a personal business relationship with a business if:

        1.   The investment officer owns 10 percent or more of the voting stock or shares of the
             business organization or owns $5,000 or more of the fair market value of the business
             organization;




                                                        -2-
Disclosure of Personal Business (continued)

        2.    Funds received by the investment officer from the business organization exceed 10 percent
              of the investment officer’s gross income for the previous year; or,

        3.    The investment officer has acquired from the business organization during the previous
              year investments with a book value of $2,500 or more for the personal account of the
              investment officer.

       An investment officer who is related within the second degree of affinity or consanguinity, as determined
under Texas Government Code ' 573, to an individual seeking to sell an investment to the County shall file a
statement disclosing that relationship with the Texas Ethics Commission and Commissioners Court.

Investment Objectives

        The investment objectives for all funds in the custody of the county auditor are to:

        1.    Ensure the preservation and safety of principal. Capital loses should be avoided,
              whether they may be from erosion of market value or security defaults;

        2.    Minimize all unnecessary investment risks, in spite of any possible increase in
              investment income;

        3.    Ensure liquidity so that sufficient funds are available to meet immediate short-term
              needs for the daily operations of the fund;

        4.    Attain the best yield or rate of return allowed through the prudent and legal investments
              of County funds throughout budgetary and economic cycles. The County’s risk
              constraints and the cash flow characteristics of the investment portfolio should be taken
              into consideration for each investment;

        5.    Provide diversification within each of the funds where permissible to avoid an over
              concentration of funds in a single investment type;

        6.    Regulate cash flow by determining the amount of money to be invested and the time to
              maturity based on the anticipated cash flow needs through continuous forecasting.

Investment Strategies

        Investment Strategy for all Funds

         The main investment objective for all funds is to create a diversified structure that will insure the preservation
and safety of principal while minimizing volatility during economic cycles. The secondary objective is insuring that
sufficient funds are available to meet cash flow needs. The third objective is to invest in eligible securities that will
yield the highest rate of return possible while maintaining the safety of principal. Suitable investments to accomplish
this are high quality, marketable, short to medium term that complements each other in a laddered maturity structure.



                                                           -3-
Investment Strategies (continued)

        General, Special, Enterprise and Internal Service Funds

        All investments approved by Commissioners Court and that meet the projected cash flow needs of the
individual accounts are suitable for these funds.

        Debt Service Fund

        All investments approved by Commissioners Court, which have a maximum stated maturity of less than 365
days or will mature on or before the next debt service payment date, whichever is shorter for the particular debt
service account, are suitable for this fund.

        Capital Projects Fund

        The suitable investments for this fund are high quality; marketable, short-term investments whose maturities
match the projected draw down schedule for each project, if available. When no draw down schedule is available or
the project has exceeded the draw down schedule, all investments must be in the shortest-term possible in order to
maintain the highest level of liquidity. A fourth objective for this fund is to comply with arbitrage yield restrictions.

        Agency Fund

        The suitable investments for this fund are high quality, marketable, short-term investments whose maturities
match the projected cash flow needs of each fund. A fourth objective for this fund is to invest the funds as required by
the agency.

Safety of Principal

         The County of El Paso seeks to minimize the risk of loss due to the failure of a security issuer or grantor. To
minimize this risk, the County purchases only securities approved by Commissioners Court, requires prior approval of
qualified representatives/business organizations with which it transacts business, diversifies investments based on each
fund’s cash flow and liquidity needs, monitors the market price of investments through independent sources such as
the Wall Street Journal or through an approved broker/dealer other than the one that sold the security to the County.

       All security investments are executed on a delivery-versus-payment (DVP) basis. Securities will be held by
the County’s custodial agent, which is designated as custodian and evidenced by receipts. The only exception is
investments made into an investment pool(s) approved by Commissioners Court.

Eligible Investments

       As provided in the Public Funds Investment Act, except those specifically not authorized in Texas Government
Code (TGC) ' 2256.009(b), the following investments may be made under the county auditor’s control:

        C        Obligations of, or guaranteed by, governmental entities, (TGC ' 2256.009)
        C        Certificates of Deposit and Share Certificates, guaranteed by FDIC (Federal Deposit
                 Insurance Corporation) or its successor or NCUSIF (National Credit Union Share Insurance
                 Fund) or its successor or fully collateralized (TGC ' 2256.010)


                                                          -4-
Eligible Investments (continued)

        C       Repurchase Agreements, with approved master purchase agreement, not to exceed 90 days
                (TGC ' 2256.011)
        C       Securities Lending Program, must meet the terms and conditions of this section (TGC §2256.0115)
        C       Banker’s Acceptance, not to exceed 270 days (TGC ' 2256.012)
        C       Commercial Paper, not to exceed 270 days (TGC ' 2256.013)
        C       Mutual Funds, not to exceed 90 days (TGC ' 2256.014)
        C       Guaranteed Investment Contracts if approved by Commissioners Court (TGC ' 2256.015)
        C       Local Government Investment pools as approved by Commissioners Court, such as (TGC
                §2256.016)

The county auditor may invest the County’s idle funds without prior Commissioners Court approval in: (see appendix
D for types of securities)

        a)   United States Treasury bills, bonds, and notes;

        b)   Fully insured and/or collateralized Certificates of Deposit;

        c)   Authorized Local Government Investment Pools (LGIP) in compliance with the Public
             Funds Investment Act, the County’s Investment policy and maintain an AAA or AAA-m or
             an equivalent rating from at least one nationally recognized rating service.

        d)   Securities from the following United States Agencies that are backed by the full faith and
             credit of the United States of America:

                  Government National Mortgage Association (GNMA) (Ginnie Mae)
                  Small Business Administration (SBA)
                  Export-Import Bank (EXIM BANK)
                  Farmers Home Administration (FmHA)
                  General Services Administration (GSA)

        e)   Securities from the following United States Instrumentalities that are backed by the full
             faith and credit of the instrumentality and have an "implied" backing of the United States
             of America:

                  Federal National Mortgage Association (FNMA) (Fannie Mae)
                  Federal Home Loan Bank (FHLB)
                  Federal Home Loan Mortgage Corporation (FHLMC) (Freddie Mac)
                  Federal Farm Credit Bank (FFCB)

        f)   Repurchase agreements through the County’s depository bank with an approved master repurchase
             agreement not to exceed 4 days.

        g)   Commercial paper though an authorized investment pool.




                                                       -5-
Eligible Investments (continued)

         If an investment becomes ineligible because of loss of the minimum required rating or possible default, and
then it no longer qualifies as an authorized investment. The county auditor shall take all prudent measures consistent
with this investment policy to liquidate the investment.

Ineligible Investments

        The following investments are not authorized investments for the County of El Paso:

        a)   Obligations whose payment represents the coupon payments on the outstanding principal
             balance of the underlying mortgage-backed security collateral and pay no principal;

        b)   Obligations whose payment represents the principal stream of cash flow from the
             underlying mortgage-backed security collateral and bears no interest;

        c)   Collateralized mortgage obligations that have a stated final maturity date of greater than 10
             years; and

        d)   Collateralized mortgage obligations the interest rate of which is determined by an index
             that adjusts opposite to the changes in a market index.

Applications for approval as Broker/Dealer

         In accordance with the Texas Government Code '2256.005(k), a written copy of this investment policy shall
be presented to the qualified representative of the business organization offering to engage in an investment
transaction with the County. To qualify for approval, a broker/dealer must submit a written application that complies
with the following requirements:

        1.   Completes and signs the County’s certification letter;

        2.   Provides references by public fund investment officers;

        3.   Provides latest audited financial statements;

        4.   Provides evidence of capital adequacy;

        5.   Acknowledges receipt, thorough review and understanding of the County’s investment
             policy;

        6.   Acknowledges that the business organization has implemented reasonable procedures and
             controls in an effort to preclude investment transactions conducted between the County
             and the organization that are not authorized by the County’s investment policy, except to
             the extent that this authorization is dependent on an analysis of the makeup of the County’s
             entire portfolio or requires an interpretation of subjective investment standards; and

        7.   Completes and returns the broker/dealer questionnaire.


                                                         -6-
Qualifications for approval as Broker/Dealer

        Applications received from broker/dealer/business organizations are reviewed by the cash management and
debt service supervisor and budget and finance manager for completeness and conformity with the County’s
investment policy. Acceptable applications are recommended to the county auditor for review and approval. The
county auditor reviews the application and if approved, an item is placed on the Commissioners Court agenda for the
court to approve or disapprove adding the broker/dealer to the County’s authorized list. To be recommended for
approval, a broker/dealer/business organization must meet and demonstrate the following criteria:

        1.   Institutional investment experience;

        2.   Good references from public fund investment officers

        3.   Adequate capitalization per the Capital Adequacy Guidelines for Government Securities
             Dealers published by the Federal Reserve Bank of New York;

        4.   Be examined by and/or subject to the rules and regulations of one or more of the following
             agencies:

                a.   Securities and Exchange Commission (SEC);
                b.   Federal Deposit Insurance Corporation (FDIC);
                c.   National Credit Union Share Insurance Fund (NCUSIF);
                d.   New York Stock Exchange (NYSE);
                e.   Federal Reserve System; or
                f.   The Comptroller of the Currency.

        5.   Membership in good standing in the National Association of Securities Dealers (NASD);

        6.   Valid registration with the Texas State Securities Commission;

        7.   Acknowledgment of thorough review and understanding of this investment policy;

        8.   Acknowledgment of the implementation of reasonable procedures and controls in an effort
             to preclude investment transactions conducted between the County and the organization
             that are not authorized by the County’s investment policy, except to the extent that this
             authorization is dependent on an analysis of the makeup of the County’s entire portfolio or
             requires an interpretation of subjective investment standards; and

        9.   Be one or more of the following types of institutions or groups:

                a.   The County’s depository bank(s);

                b.   Any other bank that is insured by FDIC or NCUSIF and meets the
                     County’s collateralization requirements;




                                                        -7-
Qualifications for approval as Broker/Dealer (Continued)

                c.    Any primary dealer affiliated with the Federal Reserve Bank of New York is preferred. It is
                      acknowledged that being affiliated with the Federal Reserve Bank of New York is not a
                      guarantee of credit worthiness; all others must be throughly reviewed and approved prior to any
                      purchases being made;

                d.    Any secondary dealer affiliated with a primary dealer who is affiliated
                      with the Federal Reserve Bank or its branches (see Appendix B).

Approval of Broker/Dealers

         In accordance with Texas Government Code '2256.025, Commissioners Court shall, at least annually, review,
revise, and adopt a list of qualified brokers that are authorized to engage in investment transactions with the County.
Commissioners Court bases its review on the recommendations of the county auditor and may approve any number of
qualified broker/dealers. The County of El Paso and the county auditor may only purchase securities from approved
broker/dealers. The county auditor may remove any broker/dealer from the approved list for failing to comply with
the County’s investment policy and notice of this removal will be given to Commissioners Court.

Annual Review of Approved Broker/Dealers

        All approved applicants must submit a new certification letter, broker/dealer questionnaire, audited financial
statements within 60 days of the date the County’s revised investment policy is sent to them. The cash management
and debt service supervisor, budget and finance manager, and the county auditor then review the applications, after
which, a list of qualified broker/dealers is submitted to Commissioners Court for approval.

Removal from Approved List

        The county auditor may review and reevaluate the broker/dealers currently on the approved list at any time
when the county auditor discovers good cause. The county auditor may immediately remove any broker/dealer from
the approved list for the following reasons:

        1.   Placing the County’s funds at risk;

        2.   Failure to maintain the requirements of this investment policy;

        3.   Failure to comply with the Texas Public Funds Investment Act;

        4.   Offering to sell investments other than eligible investments described in this policy to the
             County; or

        5.   Consistently causing an administrative burden by inaccurate documentation, attempting to
             submit oral bids, or late verification of trade.




                                                         -8-
Diversification of the Investment Portfolio

        Diversifying the Investment Portfolio by Type

The county auditor minimizes the risk of loss of principal in the investment portfolio by diversifying investments by
type and maturity. The county auditor maintains diversity in the types of eligible investments limiting the maximum
percentage that may be invested in each type of eligible investment to the percentages listed as follows:

        Type of Investment                                                                                            Percentage Limit

        Obligations of the U. S. Treasury Bills, Bonds, and Notes, .................................................... 100%

        Obligations of U. S. Agencies and Instrumentalities, .............................................................. 100%

        Certificates of Deposit issued by a state or national bank domiciled in Texas or a savings and loan
        association domiciled in Texas,                                                              100%

        Local Government Investment Pools (LGIP) if the following conditions are met:

                   1.      The LGIP is organized under the Interlocal Cooperation Act, as amended;

                   2.      Is authorized by Commissioners Court;

                   3.      Individual securities have a maximum maturity of two years or less in
                           accordance with the Public Funds Investment Act; and

                   4. The LGIP complies with all requirements of the Texas Public Funds
                      Investment Act.
                   5. The LGIP must be continuously rated no lower than AAA or AAA-m or at an equivalent rating
                      by at least one nationally recognized rating service and have a weighted average maturity no
                      greater than 90 days. TGC §2256.019

        The County may invest............................................................................................................ 100%

        Repurchase agreements if the following conditions are met:

              1.        Is authorized by Commissioners Court;

              2.        A master repurchase agreement is signed by both parties;

              3.        Accounts and funds have been designated by the County Auditor;

              4.        The funds are in excess of the compensating balances required to the accounts;

              5.        The repurchase agreement is collaterized at least a 102% of the market value of the funds
                        invested;



                                                                       -9-
        Diversifying the Investment Portfolio by Maturity

         The county auditor monitors the maturity of all investments in the portfolio to minimize the risk of loss from
interest rate fluctuations and to ensure that the maturities do not exceed the projected cash flow requirements within
the portfolio. The maximum allowable stated maturity of any individual investment in the investment portfolio is as
follows:

        Type of Investment                                                                                                 Maturity Limit

        Obligations of the U. S. Treasury Bills, Bonds, and Notes, .................................................. 5 years

        Obligations of U. S. Agencies and Instrumentalities, ............................................................ 5 years

        Local government investment pools (LGIP) if the following conditions are met:

                   1.     The LGIP is organized under the Interlocal Cooperation
                          Act, as amended;

                   2.     The LGIP is authorized by Commissioners Court;

                   3.     The LGIP complies with all requirements of the Texas
                          Public Funds Investment Act.

        The County may invest funds for ............................................................................................. 1 day

        Repurchase agreement ........................................................................................................... 90 days

        Certificates of Deposit .......................................................................................................24 months

        Domestic commercial paper (purchased through investment pool only) ............................ 270 days

        Diversification Restrictions by Fund

        General Fund

                 The general fund has no other restrictions except by type and maturity as described above.

        Special Revenue Fund

               The special revenue fund is restricted to a maximum maturity of one year or less, due to the short-term
        nature of these funds. Investments in the special revenue fund are restricted to maturities that meet the
        projected cash flow needs of the fund.

        Debt Service Fund

              Investments in the debt service fund are restricted to a maximum maturity of less than one year, with
        investments scheduled to mature on or before the debt service payment dates.


                                                                       - 10 -
        Diversification Restrictions by Fund (Continued)

        Capital Projects Fund

              Capital projects fund investments may be restricted to shorter maturities due to cash flow requirements.
        Additional restrictions may be placed on the capital projects fund due to arbitrage restrictions.

        Enterprise Fund

                Enterprise fund investments are restricted to maturities that meet the projected cash flow needs of the
        fund.

        Internal Service Fund

               The internal service fund investments are restricted to short term maturities of six months or less, due
        to the unpredictability of the cash flow needs for this fund.

        Agency Fund

       Agency fund investments are restricted as to the type and maturity by various legal statutes and the
unpredictability of the cash flows. The most suitable investments for the agency funds are those that mature in three
months or less.

Competitive Selection of Investment Instruments

         The County requires competitive bids on all securities purchases, except for those transactions in LGIPs,
government securities purchased at a favorable rate that requires quick action in order to secure the rate at the
discretion of the county’s investment officer or government securities purchased through an approved broker/dealer at
the auction price. At least three broker/dealers must be contacted in all securities transactions. If a specific maturity
date is required, either for cash flow purposes or for conformance to maturity guidelines, bids are requested for
instruments which meet that maturity requirement or are as close to but do not exceed the maturity date. Bids are
requested from broker/dealers for various options in regard to terms and instruments. The County accepts the bid,
which provides the highest rate of return within the maturity, required and is submitted within the deadline specified
on the bid sheet and within the parameters of this policy.

         Investment pool rates may be accepted without soliciting competitive bids from broker/dealers. Records are
kept of the bids received, time the bid is received and the bid(s) accepted.

Safekeeping and Collateralization

        All investment securities pledged to the County are held in a third-party safekeeping account by an institution
designated as primary agent. The primary agent issues a safekeeping receipt to the County listing the specific
instrument, rate, maturity and other pertinent information.

Certificates of deposit are insured by the FDIC and/or collateralized by U.S. Treasury or Government or agency
securities. Other investments are collateralized by the actual security held in the safekeeping account



                                                         - 11 -
Safekeeping and Collateralization (Continued)

by the primary agent. Collateral for investment pools approved by Commissioners Court will be held in the sole
possession of their trust company in a book entry safekeeping account at a third party bank. Collateral for LGIP on all
investments is held in book entry safekeeping account at the third party bank, or an independent third party institution
designated by LGIP on behalf of LGIP.

       The County’s deposits in its depository bank are collateralized by FDIC insurance and securities held in the
County’s name at the third party bank.

Investment Procedures

         The County receives revenues from various sources, which are distributed among various funds. The daily
receipts in excess of disbursements are deemed cash available for investment and are invested either in the County’s
depository bank, United States Government securities, Agency securities, investment pools or other investments as
approved by Commissioners Court.

         The investment analyst is required to invest through the following steps. An investment schedule is prepared
daily evaluating projected cash available on the books for investment in each fund. This is determined by adding the
balance carried forward from the prior month to all the current month's receipts and disbursements. All receipt and
disbursement information is provided near the end of the business day by the treasury division. The following
morning, an analysis is made between the cash available on the books and funds deposited in the county depository
that are not immediately required to pay obligations of the County, commonly known as "float", to determine the
amount to be invested. Once the amount to be invested is determined an analysis is made of the various investment
types available to determine what to invest in and for how long.

         After the schedule is completed and the amount to be invested is determined, it is reviewed by the cash
management and debt service supervisor for approval. After approval is given, an investment is made in one or more
of the authorized investment types as stated in this policy. The County’s funds are invested in securities through a
competitive bid process involving approved securities broker/dealers, whereby the investment analyst, for audit trail
purposes, prepares and sends a bid sheet specifying the type and maturity of security to be purchased or sold to the
approved broker/dealers for bids. A confirmation sheet is printed for each bid request faxed to broker/dealer as
backup that the broker/dealer(s) were sent a bid request. Three bids are solicited. Broker/dealers are selected on a
rotational basis if the County has more than three approved broker/dealers, so that all broker/dealers are given a fair
chance to bid. Broker/dealer(s) are required to return the investment bids by a specified time deadline by either
E-Mail or facsimile and all bids must be in writing. After their bids are received, the investment analyst evaluates
the bids on the bid analysis worksheet. The bids are ranked from the highest rate of return to lowest. The investment
analyst then calls the broker/dealer with the highest rate of return to purchase the securities. In the event that the
highest broker/dealer is unable to provide the securities, the investment analyst will proceed to the broker/dealer with
the second highest rate of return. If the two highest broker/dealers are unable to provide

         The securities then it will be re-bid on the next business day. The same procedure applies to the sale of
securities in case of an urgent need of funds. Due to time limitations imposed by the market in purchasing
governmental securities, the county auditor generally reviews and approves this worksheet after authorized personnel
as designated in this policy have purchased the instruments. Bids that do not meet the County’s time deadline will
not be considered.



                                                        - 12 -
Investment Procedures (Continued)

         After all decisions have been made to purchase securities, the investment analyst prepares a wire transfer form
that details the specifications of the security investment. Authorized signatures from the county auditor's office and
the treasury division are required to purchase securities and complete the wire transaction. The wire transfer form is
then facsimiled to our depository bank or safekeeping bank for further wire transfer credit to the winning
broker/dealer. All securities transactions are settled on a "delivery versus payment" basis, that is, County funds are
not released until the County’s depository bank has received the securities purchased. Three or more bids are also
taken if and when a decision is made to sell securities. Securities are sold in order to meet funding requirements.
Securities are normally purchased on a "next day settlement" basis and sold on a "same day basis".

         LGIP are an investment alternative for local governmental entities to fixed maturity investments. LGIPs offer
safety, efficiency and liquidity to participants and provide a high rate of return on investments as well as investment
expertise.

         As set forth in Texas Government Code '2256.051, any local government may use electronic means to
transfer or invest any and all funds collected. After the LGIP transaction is completed, the wire is initiated through the
County’s depository bank’s electronic transfer system currently being utilized by the investments division to initiate
the transfer of funds into authorized LGIP investments. The treasury division is responsible for confirming the
investment and providing secondary authorization. Without secondary authorization, the transaction is invalid. After
the transaction is completed, a proposal is prepared to determine from where the invested funds will be applied in the
consolidated fund.

        LGIP investments have very high liquidity, funds can be invested and withdrawn within 24 hours or less.
The County’s outstanding investments schedule must also be updated with the new information as well as the LGIP
worksheets. The LGIP worksheets are set up by month in order to maintain a reconcilable format for all LGIP
investments. These worksheets maintain a daily interest earning balance for each investment and are helpful in
reconciling at the end of each month.

        After the proposal is done, along with the schedule, a copy of the treasury's daily cash balance, and the
County's outstanding investments schedule are submitted to the county auditor for approval. Due to the tight time
constraints involved, the investments are made before the county auditor reviews and approves the funds invested.

        After an investment is completed, the information is recorded on a schedule called the County’s outstanding
investments, which is categorized by fund. This schedule is run on a personal computer macro, which generates a
recapitulation showing all the investments outstanding, and maturity dates. Transfer form vouchers are prepared for
each fund and attached to the electronic transfer forms to be entered on the County’s Financial Accounting
Management Information System (FAMIS).

         Investment activities from Friday through Thursday will be entered in FAMIS no later than Friday, but in
most instances should be entered within 48 hours after they arise to assure that records reflect the most accurate and
current financial picture possible. After all investments have been entered into the system, the investment schedule
must be reconciled with FAMIS on a monthly basis using Report 17. In addition, the LGIP worksheet is reconciled
against the LGIP monthly statement. These reconciliations verify that all investments have been entered correctly and
are in agreement with the schedules.




                                                         - 13 -
Internal Control

         An annual external financial audit will be conducted by an independent auditing firm in conjunction with the
yearly annual financial audit, as well as an internal annual compliance audit both of which will focus on management
controls of investments and adherence to the County’s established investment policies in accordance with the Texas
Government Code, '2256.005(m). As part of the internal control, each schedule is prepared and initialed by the
investment analyst, reviewed, approved and initialed by the cash management and investment supervisor, a manager,
and subsequently reviewed, approved and initialed by the county auditor. In addition, the electronic transfer forms are
signed by independent authorized personnel whose names are listed on the electronic transfer agreement with the
depository bank and also by the treasury division personnel in positions of authorization as set forth in this document
before transmitting to our depository. These internal controls are designed to reduce the risk of loss of public funds
due to fraud, error, misrepresentation, or imprudent actions.

Reporting Requirements

         The investment analyst generates daily schedules that show the current cash balances in our depository
accounts, as well as any items maturing, anticipated payments, investments going out that have not been posted by the
treasury, estimated payrolls and checkruns, and any adjustments to be made by the treasury. Also, a summarization of
the portfolio's activity is presented daily to the county auditor detailing amounts maturing by date. In addition, on a
monthly basis, the investment analyst produces a listing of the portfolio showing the detail of each investment. For
example, the listing shows the yield at which it was purchased, the cost of each item bought and the type of
investment. On a monthly basis a summarized

investment portfolio is presented to the Commissioners Court members in the interim financial report showing total
outstanding investments by type.

         Not less than on a quarterly basis, the investment officer shall prepare and submit to the Commissioners Court
a written report of investment transactions for all funds for the preceding reporting period within a reasonable time
after the end of the period. The report must:

        (1)   Describe in detail the investment position of the County on the date of the report;

        (2)   Be prepared by the investment officer of the County;

        (3)   Be signed by the investment officer of the County.

        (4)   Contain a summary statement prepared in compliance with GAAP, of each pooled fund
              group that states the:

                (A)    beginning market value for the reporting period;

                (B)    additions and changes to the market value during the period;

                (C)    ending market value for the period; and

                (D)    fully accrued interest for the reporting period;



                                                        - 14 -
Reporting Requirements (continued)

        (5)    State the book value and market value of each separately invested asset at the beginning
               and end of the reporting period by the type of asset and fund type invested and the cash
               balances for each fund.

        (6)    State the maturity date of each separately invested asset that has a maturity date.

        (7)    State the account, fund or pooled group fund in the County for which each individual
               investment was acquired; and

        (8)    State the compliance of the investment portfolio of the County as it relates to:

                 (A)   the investment strategy expressed in the County's investment policy;
                       and

                 (B)   relevant provisions of this chapter.

        (9) benchmark the performance of the portfolio against the average rate of return on U.S. Treasury
            Bills at a maturity level comparable to the portfolio’s weighted average maturity in days.

         As part of the annual County audit the County’s independent auditor shall, formally review reports prepared
by the investment officer, and the results of the review shall be reported to Commissioners Court.

Notification of Investment Changes

         It shall be the duty of investment officer to place before the Commissioners Court any significant changes to
current investment methods and procedures prior to their implementation. On an annual basis, the investment policy
will be revised and formally presented to the Commissioners Court for familiarization, approval and to advise the
court of any changes in the investment process.

Selection of County Depository

        In order for a financial institution to be the County's depository, it must first go through the County's banking
services procurement process, which includes a formal request for proposals issued, at least, every 2 years and not
more than 4 years. A financial institution must comply with the requirements of the Public Funds Collateral Act
(Texas Government Code, '2257) and Texas Local Government Code, '116 as part of the County's banking services
procurement process.

Investment Officer Training

It is the County's policy to provide training required by the Public Funds Investment Act,'2256.008 and periodic
educational training relating to the investment officers duties which must include investment controls, security risks,
strategy risks, market risks, diversification of investment portfolio, and compliance with this investment policy. The
investment officer and all staff involved in the investment process shall attend these courses or seminars offered
independent source approved by Commissioners Court. The investment officer shall attend at least one training
session relating to the responsibilities under the Public Funds Investment Act within twelve months of taking office.


                                                         - 15 -
The investment officer and all staff involved in the investment process shall attend an investment training session not
less

Investment Officer Training (Continued)

than once in a two year period and receive not less than 10 hours of instruction relating to investment responsibilities
under the Public Funds Investment Act.

        Authorized sources in obtaining training are:

                 The Texas Higher Education Coordinating Board
                 Government Finance Officers Association
                 Government Finance Officers Association of Texas
                 Government Treasurers Organization of Texas
                 Texas Association of Counties
                 University of North Texas
                 County Treasurers Association of Texas
                 A Texas Institute of Higher Education
                 Texas State Board of Public Accountancy




                                                        - 16 -
                      Appendix A

        Texas Local Government Code, ' 116.112
                     Chapter 116

Vernon=s Texas Code Annotated, Government Code Title 10,
                Chapters 2256 and 2257

                 Government Code 2256

                 Government Code 2257

Vernon=s Texas Code Annotated, Government Code, Title 5,
                     Chapter 573

                      Chapter 573

Vernon=s Texas Code Annotated, Government Code, Title 7,
                     Chapter 791

                      Chapter 791




                         - 17 -
       Appendix B

    Certification Letter,
Broker/Dealer Questionnaire,




           - 18 -
                                 Texas Public Funds Investment Act
                                Certification by Business Organization


       This certification is executed on behalf of the County of El Paso, Texas (County) and
____________________________ (the Business Organization) pursuant to the Public Funds Investment
Act, Chapter 2256, Texas Government Code (the Act) in connection with investment transactions conducted
between the County and the Business Organization.

       The undersigned Qualified Representative of the Business Organization hereby certifies on behalf of
the Business Organization that:

1.     The undersigned is a Qualified Representative of the Business Organization offering to enter an
       investment transaction with the County as such terms are used in the Public Funds Investment Act,
       Chapter 2256, Texas Government Code,

2.     The Qualified Representative of the Business Organization has received and reviewed the
       investment policy of the County, and

3.     The Qualified Representative of the Business Organization has implemented reasonable procedures
       and controls in an effort to preclude investment transactions conducted between the Business
       Organization and the County that are not authorized by the County=s investment policy except to the
       extent that this authorization is dependent on an analysis of the makeup of the County=s entire
       portfolio or requires an interpretation of subjective investment standards.



               Qualified Representative of the Business Organization

               Signature ____________________________________

               Name _______________________________________

               Title ________________________________________

               Date ________________________________________




                                                  - 19 -
                                       County of El Paso, Texas
                                     Broker/Dealer Questionnaire


Name of Firm: _________________________________________________________________
Name of Parent Company (if applicable): ____________________________________________
Address: _________________________________________________________________________
_________________________________________________________________________________
________________________________________________________________________________
Phone: (_____) ______-__________________ (800) ______-_____________________________
Fax: (_____) _______-___________________ E-Mail __________________________________
Registered principal: _______________________________________________________________
Title: ____________________________________________________________________________
Account Representative: ____________________________________________________________
Title: ____________________________________________________________________________
Backup Representative: _____________________________________________________________
Title: ____________________________________________________________________________
Do you have an office of the firm for brokerage or other services located within our area? ________
Address of office __________________________________________________________________
______________________________________________________________________________
_________________________________________________________________________________
Has/have the representative(s) listed above been authorized by the firm to be the account representative(s)
for the County of El Paso, Texas? _______________________________________
By Whom? _______________________________________________________________________

Please provide a separate sheet of background information concerning the account representative(s)
listed above.




                                                  - 20 -
County of El Paso, Texas
Broker/Dealer Questionnaire
Page 2

How long has the direct representative been an institutional governmental securities broker? ______

How long has the direct representative been an institutional fixed-income broker?_______________

Is your firm a member of NASD (National Association of Securities Dealers)? _________________

If not, why? ______________________________________________________________________

Place an AX@ by each regulatory agency that your firm is examined by and/or subject to its rules and
regulations.

FDIC ______       SEC ______          NYSE _______          Federal Reserve System _______

Comptroller of Currency ________

Do you have full SIPC (Securities Investor Protection Corporation) insurance coverage? __________

Please provide information on a separate sheet regarding additional coverage for your customers in case
of default or failures.

Does the firm have primary dealer status with the Federal Reserve Bank of New York? ___________

How long has the firm had primary dealer status? _________________________________________

Are the firm and the account representative(s) registered with the Texas State Securities

Commissioner?____________________________________________________________________

Since? ___________________________________________________________________________

Please provide references from at least four comparable public sector clients. We would prefer public sector
clients located in the State of Texas, if possible.

Client Name ______________________________________________________________________

Address __________________________________________________________________________

Person to contact __________________________________________________________________

Telephone Number ______________________________________ Length of relationship ________
                                                   - 21 -
County of El Paso, Texas
Broker/Dealer Questionnaire
Page 3

Client Name ______________________________________________________________________

Address __________________________________________________________________________

Person to contact __________________________________________________________________

Telephone Number ______________________________________ Length of relationship ________

Client Name ______________________________________________________________________

Address __________________________________________________________________________

Person to contact __________________________________________________________________

Telephone Number ______________________________________ Length of relationship ________

Client Name ______________________________________________________________________

Address __________________________________________________________________________

Person to contact __________________________________________________________________

Telephone Number ______________________________________ Length of relationship ________

The following section is to be completed by any firm that does not currently hold primary dealer status.

In which market sectors does the local firm/desk specialize, if any? __________________________

_________________________________________________________________________________

_________________________________________________________________________________

Please identify your most directly comparable public sector clients. __________________________

_________________________________________________________________________________

How long has your firm been in business? ______________________________________________

Are you a subsidiary of another firm? _________________________________________________
County of El Paso, Texas
                                                - 22 -
Broker/Dealer Questionnaire
Page 4

If yes, which firm? ________________________________________________________________

How long have the two firms been associated? ___________________________________________

What was the firm=s total volume in United States Treasuries and agencies for the last fiscal year?

Firm wide: $ ______________________________________________________________________

This office: $ _____________________________________________________________________

Is your firm an inventory dealer? ______________________________________________________

Do you take a position in securities that you sell or buy? ___________________________________

Does your firm comply with the SEC (Securities Exchange Commission) net capital guidelines on a
continuous basis? ______ How much excess capital do you maintain?_______________________

Through which firm do you clear? _____________________________________________________

Do you clear on a fully disclosed basis, i.e., will the clearing firm be acting as principal on the transaction?

_____________________________________________________________________

Please attach a separate sheet with your full delivery instructions.

Please return to:

Edward A. Dion
El Paso County Auditor
500 East San Antonio, Room 406
El Paso, Texas 79901-2407




                                                      23
        Appendix C


Investment Pool Questionnaire




             24
                                      County of El Paso, Texas
                                   Investment Pool Questionnaire


Name of Investment Pool or Mutual Fund _____________________________________

Name of Managing firm(s) _________________________________________________

_______________________________________________________________________

Address: _______________________________________________________________

_______________________________________________________________________

_______________________________________________________________________

Phone: (___) ____-_____________________ (800) ____-________________________

Fax: (____) ____-_____________________ E-Mail _____________________________

Web Site _______________________________________________________________

Registered Principal: ______________________________________________________

Title: __________________________________________________________________

Account Representative: ___________________________________________________

Title: __________________________________________________________________

Backup Representative: ____________________________________________________

Is the Investment Pool or Mutual Fund continuously rated by at least one nationally recognized
investment rating firm?

Moody’s ____ Rating __________        Standard & Poor’s ____ Rating _____________

Fitch ____ Rating ___________

Other specify ________________________________________ Rating ____________

Please return to:

Edward A. Dion
El Paso County Auditor
500 East San Antonio, Room 406
El Paso, Texas 79901-2407



                                                  25
                    Appendix D

 List of Primary Government Securities Dealers

http://www.ny.frb.org/markets/pridealers_listing.html




                         26
   Appendix E

Types of Securities




        27
                                             Securities Types

United States Treasury Securities


        U.S. Treasury – Bill (T-Bill) A treasury bill is an obligation of the United States Government to pay
the bearer a fixed sum on a specific date. T-Bills are sold at a discount from their par (face) value. The
return on investment is the difference between the discounted purchase price and the selling price or face
value at maturity. T-Bills are short-term securities with fixed maturity of one year or less. T-Bills are
backed by the full faith and credit of the United States Government.

       U.S. Treasury – Notes and Bonds (T-Notes, T-Bonds) T-Notes and T-Bonds are coupon securities
paying interest every six months. T-Notes have a fixed maturity of not less than one year or more than ten
years. T-Bonds are securities with maturities of more than ten years. T-Notes and T-Bonds are sold at a
premium or discount depending on the coupon rate of the security. Interest is accrued for those T-Bonds
purchased between interest periods. T-Notes and T-Bonds are backed by the full faith and credit of the
United States Government.

United States Government Agency and Instrumentality Securities

Agencies

        Government National Mortgage Association (GNMA) (Ginnie Mae) GNMA exists to provide a
secondary market for real estate mortgages and therefore spur private housing in the economy. The most
attractive securities offered by the GNMA and available to government investors are “fully modified pass-
through mortgages”. The mortgages are pooled into mortgage-backed pools by GNMA. The pools are
structured to provide good diversification and value. The securities have stated maturities equal to the
underlying mortgages, which range from 12 to 40 years. The GNMA guarantee of timely principal and
interest payments is backed by the full faith and credit of the United States Government.

        Export-Import Bank (EXIMBANK) The Export-Import Bank was founded in 1934 and operates
under an authority granting broad powers to finance and facilitate exports of U.S. products by extending
loans, guarantees and export credit insurance. All contractual liabilities of EXIMBANK constitute general
obligations of the United States Government and are backed by its full faith and credit. This is a program
designed for economic development purposes and not for investment purposes. Such loans are not liquid
and are bought simply as a buy-and-hold proposition.

       Small Business Administration (SBA) Credited in 1953, the Small Business Administration,
provided loans to small business through the issuance of Debentures under the Small Business Investment
Company Program, Regular Business Loan Program, Single Loan Sales, SBA Loan Pools, and Certified
Development Company Program. Although these debentures are backed by the full faith and credit of the
United States Government, they are long-term investments and lack liquidity.




                                                     28
       Tennessee Valley Authority (TVA), Established by an act of congress in 1933 to develop the
resources of the Tennessee Valley region. TVA bonds are not obligations of, nor are they guaranteed by, the
United States.

        General Services Administration (GSA), established by the Federal Property and Administration
Services Act of 1949. The GSA issues participation certificates to fund the construction and purchase of
public buildings. These certificates are backed by the full faith and credit of the United Stated Government.
These certificates are long term and have no ready market.

        Maritime Administration Merchant Marine Obligations are issued and guaranteed in accordance
with the provisions of the merchant Marine Act of 1936 as amended by the Ship Financing Act of 1972.
The obligations are guaranteed by the full faith and credit of the United States Government. These
obligations are long term investments and lack marketability.

Instrumentalities

        Federal National Mortgage Association (FNMA) (Fannie Mae) Fannie Mae was incorporated in
1938 as a corporation Wholly owned by the government. In 1968, congress enacted legislation to privatize
Fannie Mae. By 1970, Fannie Mae completed the transition and officially became a private corporation.
The obligations of Fannie Mae are not guaranteed by United States Government and do not constitute a debt
or obligation of the United States government or any agency thereof.

        Federal Farm Credit Bank (FFCB) Federal Farm Credit Bank bonds are not backed by the full
faith and credit of the United States government. The bonds are secured by collateralized obligations of the
banks operating under federal charter with governmental supervision.

       Federal Home Loan bank (FHLB) system was organized in 1932, under the Federal Home Loan
Bank Act and restructured under the Financial Institutions Reform Recovery, and Enforcement Act of 1989
(FIRREA). Twelve District Banks comprise the system and are distributed geographically around the
country. The obligations of the system are not backed by the full faith and credit of the United States
Government. However, the banks are required to maintain secured advances, guaranteed mortgages, U. S.
Government securities or cash in an account at least equal in size to its outstanding obligations.

        Federal Home Loan Mortgage Corporation (FHLMC) also known as Freddie Mac is a
government-sponsored enterprise chartered under Title III of the Emergency Home Finance Act of 1970.
Freddie Mac purchases residential mortgages from individual lenders, groups the mortgages onto pools and
subsequently sells mortgage-backed pass-through securities backed by such mortgages. Freddie Mac
Guarantees timely payment of principal and interest. These securities are not backed by the full faith and
credit of the United States Government.

        Student Loan Marketing Association (SLMA) also, known as Sallie Mae was established in 1972,
by congress, as a private not-for-profit Corporation. Sallie Mae obtains funds from the sale of its debt
obligations. These obligations are not backed by the full faith and credit of the United States government.




                                                     29
        Financing Corporation (FICO) was chartered b the Federal Home Loan Bank board in 1987.
FICO’s sole purpose was to provide a financing vehicle for recapitalizing the reserves of the Federal
Savings and Loan Insurance Corporation (FSLIC). FICO’s are secured by United States Treasury
obligations, which are held in a separate account. Obligations of FICO are not backed by the full faith and
credit of the United States Government. All FICO obligations are long-term obligations (30 years) and are
therefore not suitable for short-term investment.




                                                    30

				
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